The people of Ecuador are rising up to refound their country as a pluri-national homeland for all. This inspiring movement, with Ecuador's indigenous peoples at its heart, is part of the revolution spreading across the Americas, laying the groundwork for a new, fairer, world. Ecuador Rising aims to bring news and analysis of events unfolding in Ecuador to english speakers.

Saturday, December 06, 2008

Ecuador hardens debt position, mulls default, December 05, 2008

Ecuador hardened its position over 'illegal' debt by threatening again not to honor its sovereign bonds despite plans to fight its case in international courts, the finance minister said on Thursday.

Ecuadorean President Rafael Correa raised fears of a default last month by delaying a coupon payment of its 2012 global bonds, saying it was using a 30-day grace period to decide on its next move over loans he considers riddled with irregularities when issued by past governments.

While the Socialist government has not ruled out a default, its plans to go to court to challenge the legality of its debt had raised some investors' hopes that it would pay the coupon by the Dec. 15 deadline despite its rhetoric.

But Finance Minister Elsa Viteri warned bondholders that Ecuador was not playing games with its various policy statements because it was serious about addressing what it considers irregularities in bonds.

'It's the job of the Finance Ministry to comply with the orders of the president of seeking all means and mechanisms to halt the payment of illegitimate and illegal debt,' Viteri told reporters in Quito.

'If we have to reach a default we will do it with responsibility.'

Viteri said the government has recently paid $1.2 million on outstanding Brady bonds, a small quantity of defaulted bonds left from a 2000 debt restructuring that led to the issuance of the current Global bonds.

Viteri said the government decided to pay the Brady bonds because it could not opt for a grace period to analyze it.

The government is still studying lawsuits to annul the global bonds due in 2012, 2015 and 2030 that are worth around $3.8 billion, Minister of Politics Ricardo Patino said in the same briefing. He said Ecuador would ask the International Court of Justice at the Hague for a legal opinion.

Some Wall Street analysts say Correa's debt default threats are part of tough negotiations to push bondholders to restructure their debt to extract better terms for the oil-producing nation. Litigation to stop debt payments could also be part of his aggressive negotiation tactics.

With default fears likely to close off some foreign credit lines, Ecuador stressed its access to international funds.

Ecuador has secured a $200 million credit from the regional lender, the Andean Development Bank, and was seeking financing from OPEC ally Iran, Viteri said.

Story reporting by Alonso Soto;writing Saul Hudson; editing by Tom Hals from REUTERS

1 comment:

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